How To Sell Your Business For Millions

I got a call last week one of my good

friends who runs a very successful

business and as we were going through

the conversation together the topic of

selling his business came up and he got

nervous he said well I've I've ran this

business all my life this is my baby why

would I sell this but it was as if he

was about to walk down the aisle and

give his daughter to somebody I said if

he is having so much trouble thinking

about selling his own company like most

founders and entrepreneurs do

there's probably tens of thousands of

other people that are going through the

same thing why don't we make a video

about it whether you're 1928 or 42 years

old me you don't run a business you're

not a founder not a CEO maybe you're an

employee or an executive maybe a

salesperson or realtor you are going to

long what it is to go through the

process of selling the business in this

video however if you are the

entrepreneur the founder the CEO or a

partner in a company and you are

wondering should we sell should we not

sell some are telling you should sell

never sell a business you're gonna get a

lot of clarity from this video these

twelve points are gonna give you a lot

of clarity and some of them are gonna be

points that maybe you haven't even

thought about yet because look you may

have done nine million last year you may

have done ninety two million dollars of

revenue last year maybe you did 1.6

billion dollars last year what do you do

it's a lonely world sometimes right

these twelve points are gonna give you a

lot of clergy and by the way stick

around because at the end I'm also gonna

have a PDF for you to download and go

through and see if selling your company

makes sense to you number one look the

first thing you got to ask yourself

before even think about selling your

company is why do you want to sell in

the first place why are you tired or you

burned out why are you tired

why are you burned out are you not

taking some time up with your wife or

with your husband how's your personal

life is it caused by that are you going

through something you know how sometimes

people sell a home because they're going

through a divorce that they're trying to

sell the business is that really the

reason it can your marriage be saved is

it a tax consequence is it bad financial

decisions you made are you being forced

about your partner's your vendors maybe

one of your investors is buying you out

and no one knows about it maybe one of

your big customers are saying look

you're too big we can't give you this

much control we got to buy you out what

is the reasoning are you simply just

wanting to

retire and go live by in a beach house

and hang out and have the money and

enjoy the restaurant what do you want to

do see these are all questions you got

to ask yourself um go through by the way

some of these I'm giving you believe me

a lot of people call me and they want to

come and give me $100,000 say I want to

sell my business can I sit with you for

two hours because I need advice with you

my partner's want to come to you this is

something you got to do with five other

people to sit with who have sold their

businesses and afterwards they change

their minds and they said I wish I

wouldn't have sold it and some that did

sell it and they made the right decision

I do what you're gonna get a lot of

counsel to know whether it's a good time

for yourself right now or whether it's

not number two

so listen once you've addressed why you

want to sell the company and you kind of

clear about it the next thing you need

to do is get educated and the way you do

it is by meeting with an M and a broker

or a banker this is a merger and

acquisition banker this is what they do

for a living these are guys who have

contacts with lots of money some are


some are worth a couple hundred million

dollars and they are looking to buy

businesses and this is how simple it is

so let's just say I'm Johnny

I'm the M&A broker I'm the merger and

acquisition broker I know Bobby he's one

of my clients is worth a billion dollars

Bobby wants to buy businesses I

introduced him to Cindy Cindy's business

is worth a hundred million dollars Bobby

by Cindy's business without me Bobby

doesn't meet Cindy Cindy doesn't meet


that a hundred million dollar

transaction that takes place I get two

to five percent on that deal which means

two to five million dollars for making

the contact that's what the MMA brokers

do so now you realize when you meet with

these guys you got to know what they do

that's how they make their money so when

you meet they're probably gonna ask you

a lot of questions tell me about your

business how long you've been doing this

for what's your numbers look like

what's your a bitter what's your profit

how many employees do you have who else

is on your team what's your executive

team they can ask you a lot of different

questions who would you compare your

business to to other businesses what are

they value that what's their numbers

what do you think your company's worth

what do you think the market things your

company's worth you know what do you

think sellers think your company's worth

what seller would want your business

what investor would want your business

you go through this process and this

entire sit down with three MMA K bankers

it's gonna be as if you went to

university for three years to learn how

to sell your company number three so

look once you figure out why you want to

your business and you're comfortable

with it then you meet with the M&A

broker and you're getting educated about

what the market looks like right then

it's about setting timeline expectations

of when you feel comfortable even having

the conversation right you may say three

years I'll have the conversation five

years I'll have the conversation ten

years I'm open to it right now I'm very

happy I am burned out a little bit but

all I needed get away maybe I'm gonna go

on a vacation with some family because

what I'm doing here with this I'm good

though I'm good to go everything makes

sense to me great even when you set time

on expectations things could change the

economy could turn our new president

could be elected regulation could change

you still have to be nimble enough to

know what's going on with the

marketplace and knowing that your own

timeline could still change but you have

to mentally get to a place to say I'm

comfortable for this 2023 so now have to

work backwards to ask myself where I

need to be six months from now

twelve months from now 24 months 136

months from now so I'm getting ready for

the day that I may sell the company

number four so once you've set your

timeline you're saying I'm comfortable

seven years from now having a

conversation five years three years and

you know how you need to work back the

next thing you need to think about is

the following your exit strategy meaning

who is an ideal buyer for you is your

ideal buyer anybody with a checkbook

because you can go to New York and sit

down with a PE firm who is willing to

cut a hundred million dollar check to

you based on the profits that you make

they don't really look at your business

they don't really look at the heartbeat

they don't really look at that stuff

they simply look at numbers and they say

well you know there's 7 million dollars

of profits the industry is typically 12

Exxon 7 million will give you 10 X 10 X

on seven million seventy million dollars

you want 70 million dollars and that's

it or it's a strategic buyer one of the

current people you work with you know

they need your technology you know they

need your shipping you know they need

certain things that you have that

without you they're gonna be in trouble

so they may come in and pay twice as

much as these guys are gonna pay because

you have something they need but who is

that person gonna be for you you need to

identify that from now start thinking

about that number five so now you have

your numbers you know your exit strategy

you know who you want to be your

strategic partner to buy your business

right you're comfortable with that great

no problem you know your timeline what

do you expect from these buyers what

kind of buyers are there by the way

there's four different kinds of

I've met every single one of them and

I've dealt with every single one of them

into what this looks like first kind of

bar it's a person who's very interested

in your business would love to buy it

but they can't afford it this is like a

person who goes through Ferrari

dealership and they want a Ferrari they

love Ferraris

but they can't even afford to buy it one

focus that's the first one second one

it's a buyer that can buy ten of you but

has no interested in your business no


third one ready this one's a little

tricky this is the one that's disguised

like a buyer he comes in so interested

he has no interest in him buying your

company he only has one thing in mind

insider information because he wants to

leak it to competitors so they know

exactly what's going on they're trying

to study or my it's like a realtor that

acts like a client and a buyer and walks

into the house and saying oh wow this is

a nice home so show me so what's this

and what do you are they going through a

divorce what's going on with the husband

wife can you tell me

it's a realtor not a client that's what

happens with some of these guys as well

and last but not least it's the kind you

want to sit what's a person who is

interested has the money and would like

to cut a deal with you that's what you

want to meet with but you need to know

the different kind of buyers they're

gonna sit with you number six so now

that you know your exit strategy now

that you know what kind of buyers are

gonna come knock on your door to want to

buy your business what can you do in the

interim to increase the value of your

business right what could you do it's

like I want to sell my house but maybe

it doesn't look that good I've got to

paint that house I got to clean the

garden the backyards kind of messy maybe

I got to spend an additional fifty

hundred thousand dollars to increase

divide the company by four hundred

thousand dollars right so in the interim

what could you do hire a new CFO that

kind of knows what they're doing that's

been through this process before and you

kind of come in advance for three years

so prepare for that opportunity that

comes up could it be technology could it

be increasing sales could it be

extending your contracts with your

customers or your vendors or suppliers

what is it there are certain things you

can do today to increase the value of

business between now and the day you

sell your business number seven so the

next thing is a little dirty because you

got to start dealing with attorneys and

you know how I feel about attorneys by

the way I'm not a fan of 80 percent of

attorneys but when you find a good

attorney you got to keep them you got to

bring your attorney in spend a little

bit more money and get the attorney to

update every single contract and bring

it all in one place because when

somebody buys a business

they're looking for all the contracts

all the agreements this is the stuff

they're really relying on sometimes the

value of a company is based on the

contracts and the agreements that they

have with their vendors partners all

those different kinds of people you were

dealing with if you're wondering how you

find a good attorney i sat down with

robert shapiro a few months ago and he's

one of the most celebrated attorneys in

america ranked top 100 and some list top

10 on many other lists

he explains three things every

entrepreneur needs to know about before

hiring an attorney more is gonna put a

link below if we're to be able to watch

at episode number eight so look now that

you dealt with your attorney now we've

got to talk to your CPAs and by the way

there's a few things you got to be

thinking about when it comes down to

CPAs here's a couple things one what is

the buyer expecting to see with your

finances this is what a buyer likes I am

NOT a fan of businesses once they cross

$10,000,000 your business to still deal

with a friendly local CPA I'm not a fan

of that a friendly local CPA is good if

it's a one office shop and you're doing

a couple million you're fine they can

handle that 10 million plus you want to

get to the next level you need to go

through an accounting firm now that's

going to cost you five times more but

it's gonna save you so much more because

of a buy you're saying wow you got

audited financials for how many years

three years straight very impressive

audited financials could cost twenty

five two hundred thousand dollars

depending on how the business is it

could cost millions of dollars but I'm

saying a business that that's 50 million

your hundred million dollars a year

could cost you between 25 to 40 thousand

dollars 25 two hundred thousand dollars

you're doing but it's audited financials

and the more consecutive years you have

audited financials the buyer is liking

this the value goes higher let me

explain it in a way that makes sense to

you look if you want to buy a house

you've got to get your credit score done

earlier to know where you're at because

you're gonna know why is my score 620

here why is it 6:30 I know I'm not gonna

get the best interest rate and so you

first fix you credit then you go see if

you're gonna get a proof or million

dollar home it's gonna be the difference

between you paying you know forty-nine

hundred dollars a month for mortgage

payment versus $7,300 my for mortgage

payment because your credit score right

so this is the difference between a

buyer wanting to buy your business for

180 million dollars versus buying it for

ninety two million dollars that's a big


I like baseball cards I don't buy

baseball cards that are not greater by

PSA I don't I don't buy them because

that gives me credibility the same goes

that a buyer buys a business that has

audited financials

from a very good size good name

accounting firm number nine let's just

say at this point you've done your

attorney stuff you done your accountant

stuff you're ready it's that time you

already through the five years from now

to go out there and start putting your

business in a marketplace right are you

ready to tell your story how are you

gonna sell your story what is your story

is your website aligned with the way you

want to tell your story is it updated

what does your home office look like is

it an updated home office there's a look

like the businesses within your industry

where somebody comes in and say wow I

like the way these guys dress up here

what is it

do you have proper marketing material

you have a pitch deck what does your

presentation look like when you go and

say hey here you go mark you the

material marketing material marketing

material marketing material oh wow

this is good stuff high-end stuff you

may want to spend a little bit more

money before you present your business

to buyers that you are expecting to cut

a big check for you so you got to spend

some time getting your story together

and your website marketing Home Office

all of that stuff it's part of Story

number ten so it's that time it's

negotiation time this is like fourth

quarter type of stuff someone's gonna

cut a check what are you doing typically

owners take two different routes one is

the owner says I don't need anybody's

help I don't want to pay nobody a 5%

broker fee I know how to sell the

business I don't need anybody so and

they go by themselves it's one of the

ways you could do it the other way is

you go and hire somebody you hire a team

you hired the M&A broker the banker and

they come and help you sell now why is

that a good thing well I typically

believe in capitalism because a lot of

people make money to unit if a lot of

people make money together and you put

the tiers of bonuses based on what

amount they sell it for you're probably

going to sell it for a higher number

than you thought we're gonna sell it

right so I lean more towards this side

especially if you're dealing with a

hundred million dollar plus check go get

a pro some of you that are not good in

sales and you're selling for 10 million

you still go get a pro number 11 so you

start a negotiate you got numbers

they're making offers what kind of

offers should you expect which one

should you take what do you do well

there's different kind of offers one of

the offers the one that everybody wants

cash 50 million but no commitment no

non-compete you're good to go

if you want to compete with us in the

same space we're not worried all the

best you that's one

c'mon we'll give you 150 million dollars

with a 10-year non-compete because you

are never going to compete with us

in real estate in IT in technology in

insurance whatever maybe the next one is

they buy and exchange for stock options

they give you stock of the company

sometimes they'll do 50 percent cash 50

percent stock it's completely up to you

do you trust the stock you trust the

company is the company trending is the

company on a downfall what is it that's

on you and last but not least they'll

buy whether it's cash stock whatever way

it is and they'll tie your salary to you

with you sticking around for two years

in a non-compete after that we want you

to stick around we'll give you a hundred

million upfront then we'll give you two

years salary of a million dollars per

year then we give you stocks at the end

and the company performs the next two

years we'll give you another 75 million


dot-dot-dot another five your

non-compete after that that also happens

as well so you need to know all your

options on how you're selling what

you're most comfortable with but those

are generally some of the options you'll

have when you sell your business number


so look everything could go right in the

first eleven steps everything could go

right and then all of a sudden 80% of

the deals don't go through because a

twelve step and here's what the twelve

step is it's actually the closing part

of the sale so as you go through the

first eleven steps if you tell any

numbers to the buyers that are slightly

off the real numbers after they audits

your numbers they're gonna say wait a

minute these numbers don't match up work

we're coming out of this deal right so

three things you need to know about one

it's called ioi this is indication of

interest I am indicating to you that I

the investor I'm interested in buying

your business very cool

open up the books a little bit for us to

see something okay

cool so next is the LOI LOI stands for a

letter of intent you and I you're the

buyer I'm the one that wants to invest

into your business and buy you right we

give you a letter of intent based on

this term sheet we're gonna buy your

business so for instance we want seven

years non-compete you're out of your

mind I won't give you no more than three

years we can't do that but we want five

years okay let's agree on five years

we'll give you 75 million in cash in

seventy-five million stock I'm not doing

that I want one hundred million dollars

cash and 75 million dollar stock we're

not doing it we'll give you 50 stocks

100 million cash great we agree on all

this stuff

this is all good but it's still not done

until everything proves here based on

the audit

do with you and in comes a purchase

agreement when the purchase agreement

comes and you get the call from your guy

from your CPA from your accountant that

says 125 million dollars is in a

checking account your banker from the

bank calls you and says you're 17

million is in the checking account here

228 million is in the checking account

by the way your checking account has 1.7

billion dollars and you go to the ATM

you keep John look at the statement baby

we finally did it right or you're gonna

wake up the next day and say oh my gosh

I can't believe I saw this business this

is my baby I just let her go what do I

do now but regardless you can have all

those emotions anyways these are the 12

steps that you go through and selling

your business this alone by its up could

be a six-hour course that we couldn't do

purely on your selling your business

because there are so many different

questions you probably want to be asking

me about the different dynamics right

this is why we get the email saying I'll

give you a hundred grand for two hours

help us sell our business should we go

through shall we not go through it

anyways it is to give you an idea about

these 12 steps on what you should be

thinking about whether to sell or

whether or not to sell by the way for

some of you that I wanted to raise money

you don't want to sell your business but

you want to raise money I did a video

called how to raise money as an

entrepreneur you probably see the

thumbnail right here Mario is gonna put

a link below for you to go and watch

this video I highly recommend you go

watch that video right after watching

this video and then if you want the PDF

from today's video the 12 steps click on

the link below as well there'll be

somewhere for you to go to my website

Patrick better be calm and download the

PDF so if you have any questions

thoughts comments you can comment below

if you want to reach out to me directly

on twitter my handle is at Patrick bid

David and if you haven't yet subscribed

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next to it thanks for watching Flavio

take care bye bye